Opinion
Civil Action No: SA-03-CA-0381-XR
April 7, 2004
ORDER
On this date, the Court considered Defendant's Motion for Summary Judgment (docket no. 15) and Plaintiff's Response. After considering the evidence, applicable law and arguments of counsel, the Court GRANTS Defendant's Motion.
I. Facts and Procedural Background
On January 1, 1997, Plaintiff obtained group life insurance coverage through EDS, his former employer. Through that policy, he obtained life insurance coverage on the life of his son, Adam, in the amount of ten thousand dollars. Coverage lapsed due to non-payment of premiums on March 12, 2001.
On July 9, 2001, Plaintiff requested that the lapsed group coverage be reinstated. Defendant forwarded to Plaintiff various forms that required completion and requested that Plaintiff and his wife submit to medical examinations. Plaintiff was again issued coverage with an effective date of December 1, 2001.
Tragically, on February 10, 2002, Adam committed suicide. Under the policy, if an insured commits suicide within two years from the date his insurance becomes effective, the death benefit is limited to a refund of the premiums paid. Defendant denied payment on the life insurance policy because the suicide occurred within two years of December 1, 2001. Plaintiff argues that the reinstatement did not create a new policy, but rather merely revived the original policy, and that since the suicide occurred after January 1, 1999, denial was improper.
Plaintiff originally brought suit in state court alleging breach of contract, breach of the duty of good faith and fair dealing, and breach of standard of care or unreasonable conduct. Defendant removed the case to this Court alleging that because Plaintiff was seeking payment of insurance proceeds under an employee welfare benefit plan, Plaintiff's claims were preempted by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001, et seq. On October 6, 2003, the Court denied Plaintiff's motion for remand. The Court did not address any ERISA preemption claim in that Order, but found that diversity jurisdiction existed.
II. Analysis
In his Response, Plaintiff does not refute that his claims are preempted by ERISA. Plaintiff merely argues that the reinstatement did not create a new policy, but rather merely revived the original policy, and that since the suicide occurred after January 1, 1999, denial was improper.
A. The policy at issue
The relevant provision of the policy that requires the Court's attention states:
Reinstatement
After an Insured's coverage has lapsed, it may be reinstated at any time prior to five years after the date of Lapse if: • the Insured's Certificate has not been surrendered for the Cash Value; and
• a written request for Reinstatement and a new enrollment form are sent to CG; and
• the Insurability Requirement has been satisfied; and
• Planned Monthly Premiums are paid for at least two months; and
• any Indebtedness against the Insured's Cash Value, increased by any Loan Interest, is paid.
The effective date of the reinstated coverage will be the Monthly Calculation Date that is the same as or next follows the date the request for Reinstatement, the evidence of insurability, and the new enrollment forms are accepted by CG.
B. Tex. Ins. Code § 1106.007 is not applicable
Plaintiff argues that Tex. Insurance Code § 1106.007 provides that "on reinstatement of the policy, the original contractual provisions apply as if the coverage had been continuous." Plaintiff fails to acknowledge, however, that Chapter 1106 applies to insureds whose policies lapsed following the unintentional default in the payment of premiums caused by the mental incapacity of the insured. See Chapter 1106.002. No one argues that Terry Blalock unintentionally caused his group policy to lapse because of any mental incapacity affecting his person. Further, chapter 1106 applies to individual life insurance policies
C. Does reinstatement generate a new contract or merely restore the original?
Plaintiff next argues that reinstatement of the lapsed policy puts the original agreement back into effect, and does not result in the issuance of a new contract.
Defendant appears to argue that a new contract was created. Where a new policy is substituted for an old lapsed policy, and is substantially different, some courts have held that the new agreement should control whether an insured's suicide would absolve the insurer from payment. Gans v. Life Ins. Co., 214 N.Y. 326, 108 N.E. 443 (1915). Sandra L. Townsend stated in her affidavit that after Defendant accepted the Plaintiff's request for reinstatement, "Mr. Blalock was issued coverage under a new certificate. . . ." The new certificate, however, was not provided in Defendant's summary judgment proof. Other than a new certificate number, Defendant does not argue that any of the terms or conditions in the "new" or reinstated agreement differ in any manner from the "old" agreement.
Although not briefed by either party, the Court notes that the majority of other courts have concluded that the time specified in a suicide clause should run from the date the "old" policy became effective. Other courts have decided the issue based on the language found in the executed reinstatement application. See Missouri State Life Ins. Co. v. Hearne, 226 S.W. 789 (Tex.Civ.App.-Galveston 1920, dism'd) ("The clause in the printed application providing that, in case of insured's death by suicide within one year, the company would be liable only for the reserve on the policy, is wholly inconsistent with the following provision in the note, which purports to state the agreements under which the application and note are approved and accepted: `That, if this note is paid on or before the date it becomes due, such payment, together with said cash, will then be accepted by said company as payment of said premium, and all rights under said policy shall thereupon be the same as if said premium had been paid when due.'"). Defendant here, however, did not tender any reinstatement application and merely submitted the Statement of Physical Condition, which does not contain any restricting language.
Business Men's Assur. Co. v. Scott, 17 F.2d 4 (8th Cir.), cert. denied, 275 U.S. 531 (1927); Mutual Life Ins. Co. v. Lovejoy, 203 Ala. 452, 83 So. 591 (1919); Life Cas. Ins. Co. v. McCray, 187 Ark. 49, 58 S.W.2d 199 (1933), aff'd, 291 U.S. 566 (1934); Johnson v. Fed. Life Ins. Co., 224 Iowa 797, 276 N.W. 595 (1937); Tatum v. Guardian Life Ins. Co., 75 F.2d 476 (2d Cir. 1935).
D. Texas Case LawIn Lowry v. Aetna Life Ins. Co., 120 S.W.2d 505 (Tex.Civ.App. — Dallas 1938, dism'd), the court acknowledged that "There is some conflict in the authorities as to the effect of a reinstatement of a policy after lapse for failure to pay the premium. Some courts hold that there is a new contract of insurance as of the date of the reinstatement, but containing all the terms of the original policy, and thus hold that the clause rendering the policy incontestable applies to the new contract and authorizes a contest for the period named after the reinstatement. But we think that the better rule and the one that would come nearer doing justice is to regard the contract for reinstatement, not as a new contract of insurance, but as a waiver of the forfeiture, thus restoring the policy and making it as effective as if no forfeiture had occurred, but reserving the right of the company to avoid the effect of the reinstatement by showing, if it can, that the reinstatement was induced by unfair and fraudulent means." Id. at 507-08 (citation omitted). See also State Mutual Life Ins. Co. v. Rosenberry, 213 S.W. 242 (Tex.Comm.App. 1919) ("When thus reinstated, the policy as originally issued became as effective as if no forfeiture had been declared, unless the contract for reinstatement itself was tainted with such fraud as would justify the company in repudiating it.").
The Court acknowledges the older cases discussed above, but nevertheless finds them difficult to reconcile with the more recent pronouncements of the Texas Supreme Court. In Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132 (Tex. 1994), the Court stated:
Interpretation of insurance contracts in Texas is governed by the same rules as interpretation of other contracts. When construing a contract, the court's primary concern is to give effect to the written expression of the parties' intent. This court is bound to read all parts of a contract together to ascertain the agreement of the parties. The contract must be considered as a whole. Moreover, each part of the contract should be given effect.Id. at 133 (citations omitted). As stated above, the contract at issue provided that the "effective date of the reinstated coverage will be the Monthly Calculation Date that is the same as or next follows the date the request for reinstatement, the evidence of insurability, and the new enrollment forms are accepted by CG." Defendant has established that Plaintiff requested reinstatement on July 9, 2001. Plaintiff completed a Statement of Physical Condition on July 9, 2001. The request for reinstatement was accepted by the Defendant on November 11, 2001, with an effective date of December 1, 2001. Pursuant to the terms of the policy the effective date of the reinstated coverage was the Monthly Calculation Date (defined as the first day of each calendar month) after the new enrollment forms were accepted by Defendant. Construing the contract to give effect to the written expression of the parties' intent, reading all parts of the contract together, and giving each part of the contract effect, this Court is obligated to find that the Defendant correctly denied payment on the life insurance policy because the suicide occurred within two years of either November 11, 2001 (acceptance date) or December 1, 2001 (effective date).
Conclusion
The Court concludes that, for the reasons stated above, Defendant's Motion for Summary Judgment (Docket no. 15) is GRANTED. Plaintiff's Motion to Request a Jury Trial (Docket No. 16) is DENIED as moot.